{"term":{"slug":"candlestick-patterns","term":"Candlestick Patterns","definition":"Single or multi-candle formations that signal probable short-term price direction based on the relationship between open, high, low, and close prices. In prop firm trading, candlestick patterns are used as precision entry triggers within a larger setup.","extendedExplanation":"Candlestick patterns originated in 18th-century Japanese rice trading and remain among the most widely used entry tools in modern prop firm trading. The most reliable patterns for prop traders include the engulfing pattern (a candle that completely covers the prior candle, signaling momentum shift), the pin bar (a long wick rejecting a key level), and the inside bar (a candle contained within the prior candle, indicating compression before a move).\n\nIn the context of tight drawdown limits, candlestick patterns are valuable because they define precise entry and stop-loss levels. A pin bar entry at its close with a stop beyond its wick can produce very tight risk relative to a large target. For example, a bearish pin bar on a 1-hour chart at a resistance level might have a 15-pip wick, allowing a 20-pip stop with a 60-pip target -- a 1:3 R:R within a compact setup.\n\nProp firm traders should use candlestick patterns as confirmation, not standalone signals. A bullish engulfing candle carries far more weight when it forms at a demand zone, order block, or following a liquidity sweep than when it appears in a random location. The combination of a structural reason to trade plus a candlestick confirmation significantly improves the probability of the setup working before drawdown is consumed.","exampleWithNumbers":"Bullish pin bar on NQ 15-minute chart at a key support level: body at 17900, wick down to 17870. Entry at 17905 (close of pin bar), stop at 17860 (below wick low). Risk: 45 points * $20/contract = $900. Target: 17990 (structure high). Reward: 85 points * $20 = $1,700. R:R = 1:1.89. On Apex $100K with $2,500 trailing drawdown, this trade risks 36% of remaining drawdown room -- reasonable for one setup.","category":"strategy","relatedTerms":["chart-patterns","order-block","fair-value-gap","stop-loss","risk-reward-ratio"]},"_links":{"self":"https://runvigil.app/api/glossary/candlestick-patterns","page":"https://runvigil.app/learn/candlestick-patterns","allTerms":"https://runvigil.app/api/glossary","learn":"https://runvigil.app/learn"}}